Mine Closures Are Set to Give Zinc a Boost Zinc Prices Rose to a Nine-Month High, and Supply Is Expected to Tighten EmailPrintSave ? More . Save to ? More . Save ? More . Saved ? More .
Please log in or register for free to use Save This. Log InRegister What is Save This?Save to+ New CollectionGo to Save & Share »Name your new Collection and click save. SaveCancel Go to Save & Share »Go to Save & Share »CommentsFacebook Twitter LinkedIn smallerLargerBy Rhiannon Hoyle And @[email protected] Francesca Freeman @[email protected] connect Rhiannon [email protected]@wsj.comBiography Francesca [email protected]@wsj.comBiography Dec. 20, 2013 7:30 p.m. ETPrices of zinc, a metal used to coat steel, rose to a nine-month high amid a flurry of mine closures that are expected to tighten supplies.
Mining companies are shutting down key zinc-output facilities in Canada and Australia, because reserves in those mines have largely been depleted. Analysts at INTL FCStone Inc. INTL -2.60% INTL FCStone Inc. U.S.: Nasdaq $17.95 -0.48 -2.60% Dec. 20, 2013 4:00 pm Volume (Delayed 15m) : 184,465 AFTER HOURS $17.95 -0.00 -0.03% Dec. 20, 2013 4:44 pm Volume (Delayed 15m): 20,436 P/E Ratio 12.96 Market Cap $354.70 Million Dividend Yield N/A Rev. per Employee $50,782,300 12/20/13 Mine Closures Are Set to Give ... More quote details and news » INTL in Your Value Your Change Short position estimate global zinc supplies will fall by 1.7 million metric tons in the next two or three years. That is down from an estimated 13.01 million tons this year, according to the International Lead and Zinc Study Group, an intergovernmental organization.
Enlarge Image Zinc is among components of brass being prepared at a Serbian foundry last year. Demand for zinc has outpaced supply since then. Bloomberg News Some investors say the supply shortfall will continue to support prices in the $15 billion zinc market, a rare bright spot for commodities bulls. Analysts consider many raw-materials markets, from copper and aluminum to corn and sugar, to be oversupplied, a situation that has broadly weighed on commodity prices. The Dow Jones-UBS Commodity Index is down 8.3% this year.
The price of zinc jumped 2.5% to $2,039 a metric ton Friday, the highest closing price since Feb. 28. Despite a rally that has lifted zinc prices 8% since the start of the month, the metal is down 2% this year.
Zinc is "where the opportunity is," says Richard Davis, a mining-fund manager at BlackRock Inc. BLK +1.93% BlackRock Inc. U.S.: NYSE $314.34 +5.95 +1.93% Dec. 20, 2013 4:04 pm Volume (Delayed 15m) : 1.20M AFTER HOURS $315.02 +0.68 +0.21% Dec. 20, 2013 4:50 pm Volume (Delayed 15m): 55,871 P/E Ratio 19.31 Market Cap $51.53 Billion Dividend Yield 2.14% Rev. per Employee $969,429 12/20/13 Telecom Italia's Board vs Shar... 12/18/13 BlackRock's Hayes Sees 'Lid on... 12/18/13 BlackRock's Rieder: Fed Statem... More quote details and news » BLK in Your Value Your Change Short position who oversees about $10 billion. "There could be quite a big gap opening up between supply and demand." Mr. Davis recently has increased his exposure to zinc through shares of mining companies that focus on extracting the metal.
Zinc is resistant to rust, so it is used to coat steel for making lampposts, car doors and beams. It also is combined with copper to make brass.
Glencore Xstrata GLNCY -1.09% Glencore Xstrata PLC ADS U.S.: OTCBB $9.99 -0.11 -1.09% Dec. 20, 2013 3:53 pm Volume (Delayed 15m) : 12,571 P/E Ratio N/A Market Cap $66.82 Billion Dividend Yield 2.16% Rev. per Employee N/A 12/10/13 Swiss Village Votes to Donate ... 12/01/13 Iran Deal Opens Door for Busin... 11/29/13 GrainCorp Takeover Veto Raises... More quote details and news » GLNCY in Your Value Your Change Short position PLC's Brunswick and Perseverance mines in eastern Canada, which produced a combined 335,000 tons of zinc in 2011, closed earlier this year. And output from MMG Ltd. 1208.HK -3.53% MMG Ltd. Hong Kong $1.64 -0.06 -3.53% Dec. 20, 2013 4:01 pm Volume : 10.41M P/E Ratio 11.78 Market Cap $8.99 Billion Dividend Yield N/A Rev. per Employee $3,829,370 11/04/13 Peru Officials Meeting Chinalc... 09/30/13 Chinese Miners Compete for Gle... More quote details and news » 1208.HK in Your Value Your Change Short position 's Century mine in Australia's Queensland state is slowing as the world's third-biggest open-pit zinc mine is slated for closure by 2016. MMG has said it expects Century's output to fall about 5% in 2013.
New mining projects for zinc aren't as large as those that recently closed. Glencore officials have said they expect its new Perkoa mine in Burkina Faso to produce 90,000 tons of zinc next year. Output at Hudbay Minerals' Lalor Lake mine in Manitoba province, Canada, is forecast at 40,000 tons in 2014.
The lead-zinc study group estimated supplies of refined zinc fell short of global demand by 2,000 tons in the first 10 months of the year. In the same period last year, supplies outstripped consumption by more than 100,000 tons.
"Zinc is one of the commodities that has been a bit unloved," said Clive Burstow, who manages Baring Asset Management's $12.6 billion Global Mining Fund. "We've reached a tipping point where zinc is now moving into a sustainable period of deficit, though, and that makes it an interesting market." Mr. Burstow's fund has been placing bullish bets on zinc in recent months.
Despite the interest from fund managers, the share prices of companies that produce zinc are mostly lower, weighed down by the decline in the prices of the other metals they mine. Glencore Xstrata PLC, listed in London, is down 1.1% in December, while MMG Ltd. has fallen almost 10% in Hong Kong.
But some investors think it could take a couple of years for falling supply to really make a difference in the zinc market. Demand for base metals has been muted this year, weighed down by lower-than-expected demand from top consumer China and by concerns that the U.S.'s plans to rein in its economic-stimulus program could weigh on the use of industrial metals.
"There's demand softness short-term as China construction levels off and Europe remains weak, but also longer-term as China moves to consumer-led growth," said Koen Straetmans, senior commodities strategist at ING Investment Management, based in the Hague, Netherlands. Mr. Straetmans said his funds cut their exposure to base metals, including zinc, earlier in the year, underscoring many investors' cautious approach amid worries about slowing demand growth.
For now, though, Chinese demand remains buoyant. Net imports of refined zinc rose 20% in the January-to-October period, according to the lead-zinc study group. China buys about 40% of globally traded zinc that is delivered on ships.
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